Lending Club Review

Pros

- An average investor return of 9.65% (which is great compared to other investment options) - Great diversification with the ability to invest as little as $25 in a particular loan - Easy to use site interface - Loan payments are made monthly, and as an investor accumulates interest, it can be reinvested into other loans to continue building an interest revenue stream

Cons

- There is still some risk involved, and it increases with higher rate loans - All loans have a 3-year period, so investment money is not liquid (investors get paid principal and interest each month though, so it isn't like the entire loan is locked up for 3 years)

Full Review

Review of Lending Club

Lending Club is a peer-t0-peer lending website that brokers loans similar to a bank. Borrowers fill out an application, and if approved, Lending Club calculates a loan interest rate appropriate for the borrower's risk characteristics. If the borrower has good credit and a clean history, he or she is considered safer and therefore will be allowed to borrow money at a lower rate.

While most banks simply provide the cash for the loan (and then obviously keep the interest earned), Lending Club turns around and offers to split up the loan in increments as low as $25 and allow others to invest in it for as little as $25.

While there have been other similar peer-to-peer lenders online in the past who haven't been successful, Lending Club is showing that they're here to stay. Their system for browsing notes and investing in them is excellent, and they offer a lot of resources for investors to understand exactly what they're getting into.

One interesting part of investing with Lending Club is that the investor isn't limited to just seeing the borrower's credit score and interest rate. Lending Club is very transparent in that they show EVERYTHING one needs to know about the borrower such as his or her credit score, monthly gross income, delinquencies in the past several years, average credit balance, and more.

What's more is that investors can even read about what the borrower intends to use the loan for. This is a great way to provide a little bit of "color" to the loan, and allow the investor to only support loans that have reasonable purposes. For example, an investor might not want to lend money for an engagement ring, but may want to support someone's bathroom renovation.

Lending Club is overall an excellent place to invest, and if an investor can properly analyze the the characteristics of the borrower, he or she can earn interest rates much higher than a bank CD or money market account (even though these are safer investment options).

In Closing

This an excellent investment option if you have some extra money that you're not sure how to invest. Right now, if you sign up to Lending Club with this link, you'll get $25 free without needing to deposit any money. This is a great way to try out their service for free.